Spotify Technology keeps adding new listeners despite concerns in the music industry around artificial intelligence, supporting the company’s view that embracing the technology will only enhance its business.
The world’s biggest music streaming company reported that paying subscribers increased 2pc in the third quarter to 306 million, slightly topping Wall Street’s estimates. Total monthly active users edged up 1pc over the prior three-month period to reach 788 million.
“We think Spotify is unusually well-positioned for the age of agentic AI,” Gustav Söderström, co-chief executive officer, said on an earnings call on Thursday.
Shares rose as much as 12pc to $588.88 as trading got underway in New York.
The company has partnered with AI providers, like OpenAI’s ChatGPT and Meta’s Muse, to allow users to pull up Spotify from within those apps. While investors questioned whether that might lead to Spotify merely becoming a backend services provider, Mr Söderström emphasised that users still interact directly with the streamer.
“We are simply everywhere so that whenever you find a great song, book or a podcast, or even want to create a podcast of your own, it’s right there,” Mr Söderström added.
Total revenue in the three months ending in September climbed to €4.97bn, up 16pc over the prior year. Gross margin in the third quarter came in at 33pc
Advertising-specific revenue increased more slowly to €482m, missing estimates of €484.8m. Ad sales have long been a challenge for the company, which has struggled to turn the segment into a meaningful business despite having more free users than paying subscribers. The platform has spent years working on its ad tech to ensure more advertisers come into its pipeline.
“We’re moving in the right direction, and there’s more progress ahead,” Alex Norström, co-CEO, said on the call.
During the past quarter, Spotify announced plans to expand its audiobook business. Audiobooks, which the company says drive revenue – especially for superusers who pay extra to receive more hours of listening – are coming to new markets, including Spain, Mexico and Norway.
In the platform’s home country of Sweden, audiobooks are almost as big as music on the service and 50pc of the population there pays for Spotify.
The company’s podcasting efforts, which are now increasingly focused on a limited number of big shows, received a boost through a deal renewal with Joe Rogan, effectively giving Spotify the rights to sell advertising on his podcast, which Mr Norström said is the most popular in the world. The company also works with US comedian Amy Poehler on her podcast and has a deal with Netflix to distribute certain shows on the streamer.